Today’s Activities

PF-Chapter 1 Personal Planning 1

Today’s Activities

What shape is our economy in? Dave Ramsey Activity…

Chapter 1 Quiz

Chapter 1 Notes

Get My Goals WS

NEFE 1-7 pages


Clay’s Candy Bar Madness1. Payday: You did it! You are a Millionaire.

Statistically speaking you represent a portion of society that adheres to a financial game plan, avoids debt, invests early, and is wise with their resources

2. Smarties: Debt Free and Living Large You’ve paid for your college education, your care,

and your house, and you have a fully funded emergency fund

You live within our means, save, and pay for things with cash

You started saving for retirement a little late, but other than that you’re looking good!


Clay’s Candy Bar Madness3. Dum Dums: “Normal,

Broke, Busted and Disgusted”

23 year old college graduate Total debt is $45,000 (car:

21,000, school loan 20,000, credit card: 4,000)

Annual Income: $40,000…Monthly Take home pay $2,500…Monthly expenses…$2,125

You’ll have to save for three months to get over $1,000 in the emergency fund

It will take you 10 years to pay off your student loan, 5 years to pay off your car, and credit card by making only the monthly payment

4. Jay Breakers: “Zero, Zilch, Nada…The American Dream”

Married, 28 years old, two kids, and a dog

Combined debt of $85,400: Car loans $42,000; school loans $35,000, credit card $8,400

Annual income: $80,000….take home pay $4,700, expenses, $4,555

You’ll have to save more than 7 months to get $1,000 in emergency fund

It will take you a min. of 10 years to pay off credit card; 15 years pay off student loan, and you will always have a car payment!

12 years you will have no money in the bank and your kids need to go to college

You can’t make it…file for bankruptcy…maybe divorce

90% of divorces stem from a financial disagreements

Milk Duds: “Death by Credit Cards”Same as Jaw Breakers but with $100,000 in debt more. Under pressure, depressed, ARRRGGGG


Journal Entry

Why is it important to set financial goals? Do you think that it makes a difference in the long run?


Personal Financial Planning Arranging to spend, save, and invest

money to live comfortably, have financial security, and achieve goals

Goals: things you want to accomplish Everyone has different goals (e.g car,

pay for college, new pair of shoes, starting a business)

Financial planning WILL help you reach these goals…


Financial Planning Process1. Determine your current financial situation2. Develop financial goals

Needs vs. wants3. Identify your options (jobs, potential

income, savings, stay the same)4. Evaluate your alternatives (leave job,

save vs. spend) Opportunity cost: what is given up when

making one choice instead of another5. Create your financial plan of action6. Review & Revise Plan


Types of Risk Inflation (prices

increase) Interest (rates fluctuate) Income (loss or gain of

job) Personal (driving to

Alaska vs. flying) Liquidity: the ability to

easily convert financial assets into cash without loss in value (house vs. checking account)


3 types of Goals Short-term goals: take 1

year or less to achieve (e.g. buying a computer)

Intermediate goals: take 2-5 years to achieve (saving $ for down payment on house)

Long-term goals: take more than five years to achieve (retirement or saving for college)


Tips for Setting Goals

RealisticSpecificClear time

frameDictate

Action

Once you meet your goals you can buy goods and services…..Service: task that person or machine performsGood: physical itemConsumable Good: everyday itemsDurable Good: long term items (car)Intangibles: health, relationships


Influences on Finances You may set realistic, specific goals,

BUT…there are other life changes and challenges that can effect your goals

Some include: Economy Supply Demand Federal Reserve System Inflation Interest Rates


Now what…

Save your notes as PF-Ch 1 notes We will finish and print notes next class

Get My Goals! Worksheet Individually Get out your NEFE book and read

pages 1-7 Complete the activities on pages 1-7

with a partner quietly We will review the NEFE book pages

together at the end of class


Chapter 1 Notes (cont)

Get Article, “6 Financial Milestones before 30” and read. Journal the following: List 5 tips that the article offers to people before they turn 30.


Opportunity Costs & StrategiesWhenever you make a choice, you have to give up, or trade off, some of your other optionsWhen making your financial decisions and plans, you will need to carefully consider:

Personal opportunity costs: personal resources that impact your future potential (e.g You have tickets to a concert on Thursday night and a Math test on Friday morning. The opportunity cost of going to a concert is not getting enough sleep or study time and not doing well on the exam)

Financial opportunity costs


Financial Opportunity Costs Choosing how to spend,

save or invest your money E.g. spending $129 on new

Nike Shoks or putting the $129 in the bank to earn interest

Time Value of Money: increase of the amount of money due to interest or dividends earned


Calculating InterestYou can calculate the time value of your savings by figuring out how much interest you will earn. To do this, you will need to know:

The principal The annual interest rate The length of time your

money will be in an account

By comparing interest rates at several financial institutions, you can figure out which one will make your money grow the fastest.(PAGE 21)


Calculating Interest Terms Future Value: the amount your

original deposit will be worth in the future based on a specific interest rate over a specific period of time

Principal: the original amount of money on deposit

Interest Rates: annual rate given by financial institutions that you earn on money invested


Example of Interest Rates Calculated You deposit $1,000 into

a saving account The bank will pay you

3% annual interest FORMULA: Principal

x Annual Interest Rate = Interest

earned in 1 year $1,000 x .03 = $30 SEE PAGE 21 IN TEXT

Bank 1 Bank

3

Bank 2


Activities

Print both days of Chapter 1 Notes Bring notes for me to check (10

points)…I am looking for both days notes & both journals

Get a Chapter 1 packet and start working on

Finance Collage

Today’s Activities

Documents

Transcript of Today’s Activities